Debt talks — lots of talk, no visible progress, as clock ticks

WASHINGTON — With the clock ticking ominously closer to an unprecedented government default, the White House and congressional leaders Thursday engaged in intense discussions to reach a deal, but Republicans and Democrats continued to clash over taxes.

One plan reportedly discussed by President Barack Obama and House Speaker John Boehner would cut spending by $3 trillion over 10 years and pledge to overhaul the tax code in the near future with an eye to raising revenue. Democrats and liberal groups reacted with alarm, since such a deal would seem to be a capitulation to Republicans, with no higher revenue component guaranteed.

White House spokesman Jay Carney insisted that no deal had been reached, that one was not close, and that Obama remained committed to the idea that any big deal must be balanced between spending cuts and revenue hikes.

In his Twitter account, White House communications director Dan Pfeiffer advised, "Anyone reporting a $3 trillion deal without revenues is incorrect. (Obama) believes we need a balanced approach that includes revenues."

Still, the report of a revenue-free plan infuriated Senate Democrats. At a meeting with White House Budget Director Jacob Lew, many erupted in protest, making it clear that they would not accept any deficit-reduction agreement without higher taxes.

"Many of us were volcanic" over a no-tax deal, said Sen. Barbara Mikulski, D-Md.

Nevertheless, most observers thought the impasse would soon be resolved. If the larger "grand bargain" sought by Obama could not be reached, they suggested, some other deal will be that results in raising the federal debt ceiling before the Aug. 2 deadline to avoid an unprecedented default and the possible financial and economic calamity that could cause.

"I think it would be irresponsible on behalf of the Congress and the president not to be looking at backup strategies for how to solve this problem," said Boehner.

"At the end of the day," Boehner said, "we have a responsibility to act."

Added House Minority Leader Nancy Pelosi, D-Calif.: "It's not going to be mysterious what ends up in the final product. It's just a question of how big it is."

But there was growing impatience — and growing fear — that time is rapidly running out without visible progress.

The House of Representatives spent Thursday debating a series of unrelated bills and planned no weekend votes. The Senate debated the House-passed Republican "cut, cap and balance" plan that "doesn't have one chance in a million of passing the Senate," said Senate Majority Leader Harry Reid, D-Nev.

The plan, which passed the House Tuesday on a largely party-line vote, would cut $111 billion from spending next year and scale back future spending to be held at not more than 22.5 percent of gross domestic product next year — it's currently around 24 percent. Spending would then drop gradually to 19.9 percent of GDP by 2017.

The bill also says that before the debt limit can go up, a balanced budget amendment to the Constitution would have to be adopted, first by a two-thirds majority in each house of Congress — which is highly unlikely in either house — and then by three-fourths, or 38, of the states.

A Senate vote on the GOP plan is scheduled for Friday. Republicans say that's their plan, and until it's dead, they are unlikely to compromise publicly on some other debt-ceiling plan.

Related stories from McClatchy DC

After the Senate disposes of the GOP "cut, cap and balance" plan, Reid hopes to have a debt-ceiling and deficit-reduction plan ready, but that may not come before next week. His frustration spilled onto the Senate floor Thursday.

"I want everyone who can hear my voice to understand that time is of the essence," he said. "We are running out of time."

He also rejected the idea of a plan that cuts spending with no tax increases.

"There can't be all cuts. There has to be revenues," Reid said. "My caucus agrees with that."

Still in play in the background was the bipartisan Senate "Gang of Six" plan, unveiled earlier this week, that would save $3.7 trillion over 10 years. It's an outline that would have Congress adopt $500 billion in cuts immediately and direct congressional committees to find ways by the end of the year to save the rest.

Some said that plan was losing momentum. Sen. Saxby Chambliss, R-Ga., a "gang" co-leader, declared it "very much alive," but Sen. Tom Coburn, R-Okla., also one of the six, noted that "there's no realistic expectation that the Gang of Six plan is ever going to accomplish anything by the time we need to."

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